Full Breakdown
Goldman Sachs Lowers US Recession Probability to 25% Amid Modest Iran War Impact
5/12/2026, 12:51:11 PM
Recession Forecast Update
On Monday, Goldman Sachs chief economist Jan Hatzius said the firm cut its 12-month U.S. recession probability from 30 percent to 25 percent. The revision reflects recent data showing stronger economic activity and a financial-conditions index that has fallen below pre-war levels.
Data & Statistics
April’s jobs report added 115,000 positions, far above the 65,000 forecast, while the unemployment rate held at 4.3 percent. Private domestic sales rose 2.5 percent, offsetting first-quarter GDP growth that missed expectations. The Iran-Israel conflict caused a ten-week shutdown of the Strait of Hormuz; Goldman assumes a gradual reopening by late June, expects Brent crude to stay stable now and fall to about $90 a barrel by year-end, and notes that the United States entered the war with unusually large strategic oil reserves, limiting price spikes. The bank also points to a financial-conditions index that has slipped below pre-war levels.
Criticism & Opposition
Goldman’s 25 percent recession outlook contrasts with other analysts. Veteran economist Gary Schilling warned of a recession by the end of 2026, and Mark Zandi of Moody’s Analytics estimates recession odds near 40 percent. These dissenting views highlight continued uncertainty about the economy’s path. They caution that very large consumer price hikes could still prompt a US policy shift.
Official Statements
Hatzius said supportive fiscal policy, the AI boom, and easing financial conditions have softened the war’s impact on the broader economy. He added that a phased reopening of the Strait of Hormuz should ease supply-side pressure on oil, justifying the lower recession risk assessment. He noted that the financial-conditions index has moved below pre-war levels, reinforcing the view.
Verbatim Quotes
- “We have shaved our 12-month US recession probability from 30% to 25% as economic activity has held up well and our financial conditions index has eased back below pre-war levels,” — Jan Hatzius, Chief Economist, Goldman Sachs
- “Fiscal policy, the AI boom, and—with a brief interruption in March—financial conditions have been supportive all year,” — Jan Hatzius
- “Under our baseline assumption of a gradual Strait reopening that starts soon and finishes in late June, we see Brent prices stable in the near term and edging down to $90/barrel by year-end.” — Jan Hatzius
- “Markets never lost faith that very large consumer price hikes would prompt a US policy shift,” — Jan Hatzius
Conflicting Forecasts
Goldman’s 25 percent recession probability differs from Zandi’s 40 percent estimate and Schilling’s qualitative recession warning for 2026. The article also lacks consensus on Brent price movements after the year-end projection and provides no detail on how a full Hormuz reopening could affect inflation or growth. The article also omits details on potential policy actions to counter inflation if oil prices rise again.
